Show Me The Money | Do You Really Need To Buy Stocks?

In this episode Jake and Jeff discuss whether mutual funds are lying to you and whether you really need to buy stocks. 

What is Show Me The Money ?

Listen as Randy and Jake Floyd share their thoughts on the economy and overall financial landscape and how it relates to planning for your secure and enjoyable life in retirement. Just click on any of the shows to listen on-demand,

For the next hour, you'll be leaving the show me state and entering the Show Me the Money state. So stop what you're doing, grab a pen and get ready to learn people because you're tuned to the Ozarks number one show about your money. Randy Floyd, founder of Floyd Financial Group, we'll be your guide for straight talk about living the life you deserve in retirement prepare to be empowered. Now, here's your Show Me the Money host, Randy Floyd, thank you so much. Welcome to Show Me the Money with Jake Floyd the show that gives you the straight talk and honest answers you need to help you sustain yourself and your wealth for 30 plus years. On today's show, we're going to be discussing whether or not mutual funds are lying to you. What is that lie? We'll talk about that. In addition to asking you again, another question, do you really need to buy stocks, we'll find out also 10 strategies for investing after retirement. But we're going to start with current events. My name is Jeff shade. And as always, I'm just here to ask the questions. But of course, the words of wisdom and solid advice come from Jake Floyd Floyd Financial Group. Jake, how're you doing today? I'm doing great, Jeff. Thanks for asking. You're certainly welcome. I hope our listeners are doing well today to Jake. As always, we want to start off with current events. First of all, we were talking yesterday going over what we're going to be talking about on the show today, JP Morgan Chase has exceeded their analysts expectations. What do you make of that? And how does it affect our listeners? Yeah, so a lot of the big banks are not doing quite as well as JP Morgan. So if we look at JP Morgan's earnings report, I know there's a lot of people listening that are already starting to yawn when we get into the weeds here. But basically, they had a kind of an okay quarter, they had decent bond trading revenue and things like that. But one thing definitely stood out. And it was the acquisition of some of these banks that failed in March, and what happened there. And so they were able to take over these assets. But they were also able to claim a huge amount of money and tax credits from you, the taxpayer via the federal government. And so obviously, it's hard to be outraged at everything, because you run out of energy in today's world. But I think the fact that you and I are funding profits for JP Morgan, directly through taxpayer dollars is appalling to me. And I think everybody should be appalled that, again, we talked about before that we have Senator Warren over here on one hand, saying we need to break up the big banks, you know, and the banks are too big, and we can't regulate them effectively. And then literally the next week, we say, hey, we need you to suck up this failing bank JP Morgan and get bigger in the process. And so they have really no intention of breaking up these banks, they need these banks. So whether we like it or not, this is here to stay. But I think it's important to show light on the subject where, you know, we have taxpayer dollars lining the pockets of Wall Street executives, especially at the big banks. And Jake, is that something that has recently become the normal? Or has it always been that way? And where do you think it's leading? You know, Jeff, I think it's been that way for a long time, pretty much since we've had these big banks. But certainly since the advent of the Federal Reserve System and all that, unfortunately, they're kind of a necessary evil, we have to have these banks to be able to have the Fed and others regulate the overall monetary system. So I wouldn't expect it to stop. But at the same time, I don't think we have to lay down and just let them take our money either. Jake. Another thing that I mentioned that we were going to be talking about here in the beginning of this show was something called dis inflation. That theme has boosted the markets lately. First of all, define disinflation for our listeners. So disinflation is very different from deflation. So deflation is where we actually have prices coming down. disinflation is where the rate that prices are going up, starts to come down. So let's say we had well, in this example, last year, we had inflation close to 9% for a little while, and then now it's running more like three or 4%. And so that's disinflation, that doesn't mean prices are coming down. They're just going up at a slower rate. So yes, disinflation is definitely driving the market higher here. Everybody's kind of anticipating the Fed stopping rate raises higher interest rates are hard for business, just because it cost of capital, the cost of money in general, is higher when we have higher interest rates. And so the average business just simply costs them more to do business. And, Jake, I've read that the Fed will likely still hike rates again this month. Have you heard about that? What's your opinion on that? Yeah, so I would say that's almost a certainty, give it a 95% chance or so actually, the Fed Funds Futures On Wall Street are giving it like a 97% chance right now. But yeah, that's actually just four days away will be the next Fed meeting. And yeah, I think it's very likely we'll have a quarter point increase again, there. Now the market is kind of pricing and that's the end, though. So that's going to be the language that everybody's gonna be looking for on Wednesday is it's gonna say, hey, are they done here? Is the Fed gonna put language out there and their statement and answering their questions, Jerome Powell? Is he gonna say, hey, this might be it, or is he going to set up an expectation that he could go more if he sets up that expectation? I think the market will probably start to bleed some because I think everybody's pretty convinced this is going to be it. So if you
starts to set up a different expectation, we're going to see markets start to head south and say, Hey, how much higher we gotta go here, Jake, because of the disinflation and the deflation, do you feel like that this is the last rate hike this year? I mean, is this it? Or could we be in for another rate hike or maybe even several by the time the end of the year comes? So I think Jeff, and again, this is this is a total guess it's an educated guess. But I still a guess, I would say this will be the last one. The reason for that is in the short term, we're going to see inflation continue to cool not because prices are really cooling, but simply because our comparison to last year is going to get easier and easier. And so we're going to see that inflation rate keep coming down. And that's probably going to mean this is going to be the last rate hike. Now the question is, is how long do we stay now at 5.25%. So it's a little bit like climbing Mount Everest, if you've ever watched a documentary on climbing Mount Everest, when you get ready to Summit, you get up past a certain point, it's called the death zone. And the longer you stay up there, the higher the chances that you die, basically. And so at 30,000 feet of elevation, you're burning something like 20,000 calories a day. So you can't possibly eat that much food, obviously. So you need to get up there. And you need to get back down quickly before you cause yourself a problem. The same is true of interest rates, the longer we stay up here at five, five and a half, five and a quarter percent, the more damage it's going to do to the economy, to the jobs and all that kind of thing. And so that's really the question that needs answering. Jake, it occurred to me that if they had a fast food restaurant like McDonald's at the top of Mount Everest, we wouldn't have to worry about what we ate, would we? That's a fact. You know, I think I don't know about the rest of the listeners out there. But getting enough calories is usually not my concern.
My neither, I mean, here we are. It's a first world problem. I guess what? Yeah, we get plenty of calories here in the United States. That's a fight that that I fight every single day. We're talking with Jake Floyd Floyd Financial Group, and we're talking about current events yesterday, Jake, we were talking about something that's pretty interesting, most hated stock names, and the name Carvana came up now, why would we hate Carvana? And what are some of the other names or some of the names of stocks that we should hate or that are being hated. So when we talk about hated stock names, it's not that we actually hate these companies. What it is, is that hedge funds have short positions higher on certain companies meaning, like, again, a good example of this is like GameStop, a couple years ago, right? Gamestop kind of has a dying business model because they trade physical games, in a world where 90% of the games are now downloaded. And so the natural thing would be to bet against them if you're a hedge fund. And so Carvanha is also in a situation like that, where their business model where they have bought these cars for so much money in a declining used car price situation, it's going to be very difficult for them to make money just because they've paid so much for all these vehicles. And so it remains to be seen them not saying they're going out of business, but just when we're defining most hated stocks, we're talking about the stocks that Wall Street is short the most. So like AMC would fall into that category, some of you may have been around long enough to remember who cos is. So Costco. Yeah. You know, audio equipment, sure, and other electronics like that. So they're also kind of a dinosaur in the industry. And so but when those types of stocks start to go up, it shows it kind of reveals the speculative nature of what's going on in the market, you know, is it a real bull market? Or do we have people simply just euphoric, and, you know, high on the markets, if you will, and are just running these prices up just because they can and buy at any price, no matter how high it goes. And so to your example, Carvana, Carvana, was trading at $2. And some change, you know, a few months ago, and now it's hit 47, or something like that, this last couple of weeks. And you know, it's all over the place, it's up or down 15 and 20%. On the day, every day, usually, when you see that type of activity, you know, the last time we saw that type of activity was mid 2021, you know, too late 2021. And so that was obviously the most recent top where we hit the top of the market. And so when you start to see that activity, it's usually good to pause and go, Okay, you know, where are we at here? What's driving this, you know, multiples across the board on stocks are very expensive. You know, you have companies like Apple trading at 30 times earnings, and they're not even growing, you know, and so we'll get into a huge philosophical stock discussion here. But basically, the market in general is pretty expensive right now, given that a lot of industries and a lot of stocks are not growing very much if at all. Let's wrap up our current events conversation here by talking about cryptocurrency. Jake, I understand that there's been a recent ruling that says that x RP is not a security what does that mean for other cryptocurrencies? Yeah, so about two years ago, the SEC filed a lawsuit against a company called ripple. So ripple offers a cryptocurrency called XRP. And it is the belief today by market cap It's the third largest cryptocurrency out there see a Bitcoin you have Aetherium and then you have XRP, which is offered by this car.
Pretty ripple. And so for a long time, we didn't know which way that was going to go. But the SEC basically said, this is a security. And you're not marketing it as a security. So you're in violation of a bunch of rules. And we want purview and we want to sue you. And so it came back just this last week that XRP is, in fact, not a security. And so two days later, Coinbase started offering it again. And so we have quite a lot of dynamics there, where a lot of these cryptocurrencies are not going to be considered securities, it's not their job to say what they actually are, I would say that they're more commodities than currencies. But that remains to be seen. I think we'll see some of these other regulating bodies try their hand and say, Hey, maybe I can have purview over this since the SEC says that they don't but I think ultimately regulation is good for crypto because it's a little bit like the wild wild west out there right now. And you know, as we start to see some more regulation, it will simply legitimize cryptocurrency because I imagine a lot of our listeners because I hear it every day when people come in to see me they say, you know, this crypto stuff, it's not even real, it doesn't exist. And I think a lot of that while that's somewhat true, in theory, your dollar doesn't exist either. It's representative of a number on a screen at a bank somewhere. But I would say that the more we regulate it, the more real it will seem. And probably the more cryptocurrency will be here to stay if they continue to not regulate it. I think that's the biggest risk to cryptocurrency. Well, I'm old school as well. I mean, I've got dollar bills in my wallet here. I can see them feel them, touch them, smell them if I want. cryptocurrency is just out there in the ether. So I don't know, I guess I'm just old school. I think that cryptocurrency is something that's interesting. I'm gonna keep an eye on it. But it's not something that personally I'm going to invest in. But of course, you've got to do your due diligence. If you've got questions about cryptocurrency or currency in general, you've got questions about your retirement plan, you want to talk about inflation, you want to talk about whether or not you really need to buy stocks, which we're going to be talking about our show today. I invite you to call Jake there at Floyd Financial Group, that number 417-889-7233, get in and sit down with Jake and get your retirement review. It's not going to cost you a dime, totally complimentary, no cost, no obligation and of course, no judgement Jake will meet you where you are. Again, it's 417-889-7233 for your complimentary review. You can also request it online at Floyd financial group.com. It's Floyd financial group.com. Jake, time for a break, we come back we'll be talking about whether or not mutual funds are lying to you and more when our show continues here on one Oh, 4.1 FM K SGF. Where Springfield comes to talk.
Ready for a heaping helping of some more real talk dots. Oh, here's another serving of show me the money with your server, Randy Floyd, welcome back to show me the money. I'm Jake Floyd. And in this segment we're going to be discussing are your mutual fund returns lying to you? That's an interesting question our mutual funds lying to you What do you think the lie really is. So it's not just related to mutual funds. And it's not technically a lie. But let's let's explore something for a moment. So if you have $100,000, and I'm gonna go slow here in case you guys want to follow along and the listeners out there, if I have $100,000, and you lose 50% of that will make it 50. For a nice round number for this illustration, you now have $50,000 Now, let's say the next year we go out and you have a 50% gain, right? How much money do you have? Let me tell you what you do not have you do not have $100,000, right, right 50%, down 50% back, you have $75,000. So your average return, if I have a negative 50 and a positive 50. My average arithmetic mathematical average return is zero, but you're down $25,000. And so anytime you have a negative introduced into an average, it throws off the average from an absolute return standpoint. And so when you look at this and you look at any stock market return mutual fund return you listen to you know, Dave Ramsey talking about the market's done 12%, since 1950, all this kind of thing, you have to take that with a grain of salt, because if you have an average return of six or seven, where you're not taking any losses, that counts for a lot more, it is comparable to an eight or nine or 10% return where I do have losses in the middle, even though it's a lesser return percentage, it can end up being the same amount of money. Jake, this is something that occurs to me that might be a little confusing for most people. When you explain this to your clients. Are they confused? Are they surprised by this? Or do they really understand it at first blush, I think a lot of times when we when we have the whiteboard in front of us, which is a huge benefit and I draw the 100,000 up there. Can we show a lot of people say if I lose 50% and I gained 50% I go back to the same number and when I show them that it's not the same number. That's usually when the light bulb goes on and they realize it
Okay, so every return I've ever looked at in the stock market is not as good as it seems like it is. And that would be, you know, the most true thing you could say is, it's at least not as good as it seems like it is. And if you have an investment where you cannot lose money, there's a lot of benefits of that, including you simply just have more money at the same return level, because you don't have to account for those negatives and the fluctuation. So this is something that when people come in, I usually address and I think it can be helpful if you're a little confused right now come in and sit down with us, and I'll show you how this math works. But it just speaks a little bit to the the importance of safety as well, in a retirement portfolio, you know, we don't need to necessarily have all the money safe. And we'll talk a little bit about that in the next segment. You know, as far as whether or not you really need to buy stocks. But you know, usually in the average person's portfolio, you know, discretion can be the better part of valor, and we want to make sure we have some of this money in retirement that has a floor under it, you know, where we're not going to wake up and you know, some exogenous event on the other side of the world costs us 20 or 30%. In the stock market. Jake, on this program, before we've talked about something called sequence of return risk, is this what we're talking about here? So yes, sequence of return risk is part of this equation. But it's also just, you know, there's a lot of people that are like, Hey, I've had my money in CDs recently at 5%. You know, am I doing it wrong, basically? And the answer is no, you're not doing it wrong, a 5% return with no loss potential or close to no loss potential is a pretty good number. You know, I think ultimately, we want to shoot a little bit higher than that make a little bit more money than that. But you know, there's, there's nothing wrong with getting paid to wait on this economy to run its course, right now, you know, I think a 5% CD isn't isn't a horrible place to be, but you need to have an exit strategy, because the 5% CD will not be around forever. And you know, if you do a one year CD from now, I would argue that it's possible that you would not be able to re up that CD anywhere close to 5%. But time will tell Jake, on this graph that you showed me here, there's a right column here, which talks about the big swings, and it's showing, you know, the first year up 21%, the second year down 38%, the third year up 16%, with wild fluctuations in the market like that. And we're not saying that that actually occurs, this is for demonstration purposes only. But with wild fluctuations in the market like that, I think you may have just mentioned it, but would you be better off in the long term in just a very safe investment, like a CD? Or is there more up opportunity with the stock market, even considering those wild swings? And I think this, this is really Jeff, where it comes in handy to have an advisor, somebody you can bounce these ideas off of? Because the answer is that it depends. It depends on the timing, it depends on, you know, what's going on in the world. And what the interest rate outlook is, you know, I think most economists would agree that we're definitely at a restrictive rate of interest rates, which is what's driving these 5% Plus CDs. So as soon as the Fed lets off the gas on raising interest rates, we're probably going to see the CDs start to relax on their rates a little bit. And certainly when he starts to lower interest rates, at some point back to a less restrictive level, we're definitely going to see CDs come back down. And this is one of the reasons why CDs are paying five but your checking account still pays nothing. And you know, I have a lot of people come in to me, you know, in like Bank of America is one of the ones you know, unless you have a certain balance and they're they're charging you $14 a month to have your checking account, which is crazy. When you think about it. Like, again, you used to get a thank you and a toaster when you open an account, and you know, now you get charged and a slap in the face almost but not a literal slap in the face, I hope. But you know, it certainly just doesn't feel good to get charged to have your money somewhere, especially if you have a significant amount of money there. And so different banks have different rules. But I do think these banks are anticipating interest rates coming back down. And so they're resisting as long as possible paying people interest on their checking savings and money market balances. And I think ultimately, what they're doing is they're just simply not paying you. And then they're putting that money in short term treasuries and bonds and things like that making 5% So they're just pocketing the difference off of you. So whatever you make them pay you is just money out of their pocket. And that's why they're being in my opinion, pretty stubborn with keeping interest rates low on liquid money. Well, Jake, if I'm hearing you correctly, 5% may be the high point for these CDs. What are some of the other cash alternatives that you could get into for example, money markets, how do money markets differ from CDs? So money market at the bank is a little bit different than like a money market mutual fund. And so that's one of the things is one of our investments right now that we like a lot is a money market mutual fund, or what's called a money fund or are some similar funds are in prime funds where basically you have very short duration securities in there with very, very little risk and you know, they're paying five to you know, in some cases as much as like
5.1 Right now, if we raise rates again, you know, next week, then it'll probably go to 5.2 5.3. And so that's a pretty good interest rate to get paid to wait to see what happens in this market. You know, there's a lot of people that are kind of chasing the stock market up right now, the markets up quite a lot for the year. But if you look at who's leading, and as we talked about earlier, which stocks are participating, it might be a little bit too soon to get too excited. Now, if the market were to pull back, some that would change things, but right now, you know, we feel like it's gone a little too far a little too fast. Jake, with the talk of money, markets and money market mutual funds, can you talk about why a conversation with an advisor is really so important, why that guidance really has to happen? Yeah, because everybody's time horizons different. Everybody's income needs are different. Everybody's risk tolerance is different. Everybody's plans are different. As far as what they want to do in retirement, having a conversation with an advisor, you know, once every 90 days, six months or so is really a good practice to get into because you can really evaluate where you're at where you want to go, you know, are you spending money down? are you accumulating money? And what are your goals for the next year, five years, 10 years? You know, all that really goes into deciding what is appropriate from an investment standpoint, you know, there's no blanket answer. And so it's entirely possible that it might make sense for somebody to stay in a money market mutual fund or a CD longer than somebody else who needs to make a little bit more money or somebody that can afford a little bit more risk. If our listeners have questions about mutual funds, money markets, or basically anything as it relates to their retirement portfolio, and you would like to have a conversation with Jacob Floyd Financial Group, we're offering it of course, no cost, no obligation and no judgement call 417-889-7233 to get on Jake's calendar. That's 417-889-7233. Now this initial conversation will take about an hour, but it could be the best time investment that you will make this year. Once again. 417-889-7233 for your complimentary conversation with Jacob Floyd Financial Group. If you'd like go out to the website, check the firm out and request your appointment there. It's Floyd financial group.com, Floyd financial group.com. Time for a break. Jake, we come back, we'll be talking about whether or not you're really need to buy stocks and more when our show continues here on one Oh, 4.1 FM ks GF. Where Springfield comes to talk.
People of the Ozarks, step away from the fishing pole and prepare to be shown the money because we're back with more straight talk with Randy Floyd. Welcome back to show me the money. I'm Jake Floyd. And in this segment, we're going to ask the question, do you really need to buy stocks? And, Jake, I'm gonna ask you to answer that question in just a moment. But I want to start with a little comment about something that I read that a very high percentage of people in this country own stock something in the 60 percentile range. Is that really true? Yeah. So if we're counting, you know, the big one, there is 401k holders. So inside your 401 K, you have mutual funds, or in 403 B's, you have sub accounts, that kind of thing. And so for counting those, which inside there, you do own stock, yes, the number is a little bit north of 60%. If we look at the history of the market, that's that's really what drove the market during the 80s is, you know, prior to 1980, it was about 4% of the population own stock, because you used to have to buy a round lots of stock, meaning you had to buy 100 shares of any stock that you wanted to invest in. Well, recently, before the split, if you would have bought Amazon at 100 shares, you would have a quarter million dollars to get in. And so obviously, it was very cost prohibitive to have a diversified portfolio for the average person. But with the advent of the 401k, and the rise of mutual funds and fractional shares, meaning where you can buy less than one share, you know, you can literally put $5 to work in the stock market. And so, you know, that really has changed things. And so yes, the vast majority of people that are working, have at least some money in the stock market, either through a qualified retirement plan or their own investments. Jake, with the advent of apps such as Robin Hood, where individual investors can now invest even with as little as $5, as you said, has the percentage of people who own stocks outside of their investments at work gone up significantly. Yeah. So during the pandemic, and you know, it was a form of entertainment for a lot of people. Let's put a couple 100 bucks in here and see if we can turn it into a couple 1000 Now the vast majority of people just lost their money. But you know, there was a few stories out there. If you look for him where people have, you know, they bought options and they turned 2000 into 2 million and that kind of thing through several investments over and over and over and over and they just kind of they kept pulling on the slot machine and it kept spitting out money. Anybody who's ever been to a casino knows that that's not how they built Vegas. No.
It's usually the other way around. You put money in and nothing comes out. Nothing rooms out and nothing comes out. But you know when it comes to the stock market, I think
more participation in the market is good liquidity is what makes markets work. Meaning the more buyers and sellers you have, the better it is for everybody. It's kind of like competition in America. You know, as far as free markets, the whole idea behind there is, you know, if somebody is running a monopoly making too much money, there will be a competitor that comes up aside them, they get into a price war it everybody benefits, right all the consumers benefit. And so you know, it's kind of the same way with liquidity in the stock market, the more people that participates, the better pricing gets, and the more efficiently markets work. And so that's always a good thing. But I do think there's a lot of people that mortgaged their house and put it in the stock market, that kind of thing during the meme stock frenzy, which is obviously a horrifically bad idea. And as with anything, all things in moderation, right, we want to Yeah, it is good to invest in the stock market, it's good to see people invest in the stock market for the first time, but we want to make sure that it's money that they can afford to invest, you have long enough time horizon, that, you know, some volatility, some ups and downs isn't gonna make or break your financially when you're 30, or 35. Jake, I've heard about the historical returns of the stock market over say, the last 50 years or so that historically is generally up and people have used that to grow their wealth. So let me get back to the basic question here, the one we started with, do you really need to buy stocks to increase your wealth. So as we always say, on the show, Jeff, it depends. And I think a lot of it depends on your goals as a person, your goals for Your Money, Your Goals, the things that you want to do in life, once you're retired, what you want to have happen to your money when you're gone, you know, if you are not concerned with leaving a bunch of money to your beneficiaries, and you have saved enough money, you know, I do have clients that just they don't want to have any risk. And if you want no risk, the stock market is not a place for you. Because all investing has risk. And if you are in the market, you have a certain level of inherent risk, no matter how safe and investment that you buy. However, there are alternatives to the stock market. Again, an easy example for people to understand right now is like CDs, you know, you can put money in there, you have your money insured, and assuming we don't have Armageddon, you know, your money is gonna be there at the end of, you know, nine months, and you'll be able to take it out. There are also other alternatives, some have risks, some don'ts, you know, you can have money in gold and real estate was where there's certainly some risk, but it's an alternative to the market. There's different types of annuities that you can have, where you have principal protection, so that you don't lose money. But you could have market linked gains when markets are good, you know, those can be a good tool in retirement because it can help increase your risk adjusted return, meaning you're not taking as much risk, but you're still getting a good return. And I think you know, that's an attractive concept to a lot of people, when you go into retirement, because you've worked your whole life, you know, to get to this point, you cannot afford to have to go do it. Again, you don't want to have to stay awake at night, wondering if China's going to invade Taiwan, and it's gonna obliterate your life savings. So a certain amount of safety is important. How much safety really depends on the person, if you're a person that really wants it all safe? That's okay, too. I know, we talk about the market a lot on the show. But if you come in to me and say I don't want to invest in the stock market, that is totally fine. And there are several alternatives that we can help you with there, too. Jake, is it a fair statement to say that the stock market offers a greater potential upside than almost any other alternative? Or would you disagree with that? I would agree with that. As far as mainstream type investments, you know, investments that the everyday person has access to the stock market historically has performed better than all the other mainstream investments, if we go back to like, 1980, you know, the markets up a little over 4,000%. Since 1980, you know, real estate is up quite a lot as well, gold is up over the last 40 years about 600%, although it did hit like $1,900 An ounce in 1980. So it's up very little from there. So your entry point determines a lot about your return. And that's why, you know, we want to be careful about jumping in markets when they're inflated or, you know, maybe a little ahead of themselves. But, you know, if you're in CDs over that period, you know, from the last 40 years or so you probably have an average return of about 6%, you know, versus the stock market since 1980s. Up, you know, over 10 But your measuring point is everything. But to answer your your original question. Yes, I would say the stock market has the highest potential for gain, but it is pretty volatile. And there's been more than a few people out there that have found that out the hard way over the last 18 months or so. And it can be important to have a guide not just for the investment part of this but you know, there's a lot of things in retirement that you don't do every day. The average person doesn't file for Social Security every day. You know, they don't trigger their pension benefits every day. They don't get Medicare or file on the exchange of you know for health insurance. If
they retire early. All these things we look at every single week in here, and we can be a good guide to help you through that process. How much money? Should I withdraw off my assets? You know, what's a safe number Do not risk running out of money, or, you know, how do I take a little extra in the first 10 years or retirement, but make sure I don't run out later in retirement. And so all those types of questions we can kind of help with. But when it comes to the stock market, I think most people probably should have a little bit of money, at least in the market. And it's simply because it's a good inflation hedge. We know that over time, the dollar is going to continue to erode either slightly or a lot at a time, depending on when we're talking about, but 20 years from now, you're probably going to have roughly half the buying power that you have now on a lot of different things. And so it's going to be important to grow your money to offset that cost unless you have simply saved a whole lot more money than you need, which is not how the average person is set up. Jake, it occurs to me that with what you just said that you cannot afford not to invest in the stock market. Would you say that that is a fair statement? I would say again, I don't want to make any blanket statements, because everybody can be their situation can be quite a lot different. But I would say that on average, yes, there's a lot to be said for having at least some money in the stock market. Again, when I say everybody needs to have money the market? No, there are people that do not have the risk tolerance to deal with the stress that can come with being invested in the stock market. It just depends on how you view your money. And you know, a little bit of personality. But yeah, the stock market can be very good. It has been very good to a lot of people over the last 40 years, I would argue that there's a lot of people retired today that would not have been able to retire had they not been in the stock market for the last 30 to 40 years. Jake, I've seen and heard these commercials for these trading schools that talk about how you can time the market. And you can make all this money from one day to the next. I mean, if somebody is a DIY stock investor, do those things ever really work out? Or is there a lot more to it than what they're teaching you? So that's kind of a funny question, just because I was talking to a client about this a couple days ago. So yeah, if you get online, and there's no shortage of people telling you that they know exactly the key to the market, and then for $30 a month, you can be part of the club, they'll tell you exactly how it's gonna work? Well, here's what I would ask is, if they truly know the keys to the stock market, and they always make money, there's no reason for them to charge you $30 a month, because they would just simply invest their own money and make hundreds of millions of dollars, and they wouldn't bother dealing with you for $30 a month. So if you think about that, from a philosophical standpoint, you know, there's there's no way I would be very careful when it comes to those types of things, what we call kind of signal type investors where they say, Okay, here's this technical stock pattern, and you should buy here and sell here. And I'm going to do the same thing. In fact, there was a whole group of guys on Twitter that got busted during the pandemic, and shortly after 2021, as well, where they were in there, and they had a huge group of followers, millions of followers, and they would say, buy this, and then you know, they wouldn't tell them when to sell. And so what they would do is they would wait, they would buy ahead of time, millions of shares, and then they would tell their followers to buy it, which caused it to run up and then they would sell as it's running up and leave their investors holding the bag. And you know, that happened a lot in 2021. To answer your original question. I know of a couple of people that have successfully gone from a few $1,000 to a couple million dollars doing that sort of thing, but I would argue that they were simply lucky. Yeah, I think I think if you if you have 100,000 people and you had all of them invest in different types of stocks, you're gonna have some people that lose all their money, you're gonna have some people that you know, are down 80% Some people down 50 Some people even some people up 20 And then you're gonna have people that are up ridiculous percentages. And it's really more just kind of luck of the draw. I think that it is a certain amount of skill involved turning a very small amount of money into a very large amount of money. And Jake, I had a chuckle there because I remember a story that your dad Randy told about you had a neighbor I guess behind you at one point in time, he didn't work he said he just made his money in the stock market. He had a big house and he had a you know, a great car, he had a great truck boat, he had all sorts of things. And then one day he didn't have all those things because it just didn't work out for him trading stocks in the long run. If our listeners do have questions about stocks in their portfolio and how to maximize their potential certainly we invite you to call Jacob Floyd Financial Group sit down and talk about your individual concerns as it relates to the stock market. Again, there's no cost there is no obligation for this financial review call 417-889-7233 for 17889 7233 for your complimentary no cost no obligation and no judgment financial review, Jake and Randy and the staff there will meet you where you are employed Financial Group once again, you can go out to the website, check them out and request your appointment from there. It's Floyd financial group.com Floyd financial group.com We appreciate
Joining us here this fine Saturday morning for show me the money. We'll take a quick break, be right back and discuss 10 strategies for investing after retirement and more when our show continues here on one Oh 4.1 FM ks GF. Where Springfield comes to talk.
Ready to climb a mountain of financial know how good because it's time for more, show me the money with your financial Sherpa Randy Floyd. Welcome back to show me the money. I'm Jake Floyd. And in this segment, we're going to look at 10 strategies for investing after retirement. And, Jake, I think a lot of people do not think that you have to invest after retirement, I spent all these years working in investing now I'm retired, I'm not going to invest anymore. But apparently it is important to continue to invest after retirement up to what age? Well, that is something that's up for debate at this point. But let's talk about some strategies for investing after retirement. The first one is to take inventory of your spending needs. Can you elaborate on that? Yeah. So it's really comes down to a budget, the B word, you know, and a lot of people don't like to talk about that. It's not something you know, especially if you've been successful in life. And you know, you always have more coming in and going out, it's not something you've ever had to think about. I'd say 98% of people don't have a real budget. But it is important. It's a good first step. As you get prepared for retirement, you get into retirement, understanding what you're really spending, what you're spending it on, and what your needs are coming off of your retirement assets. Next one is avoid fear driven or emotional decisions about investments. Yeah. So if I had a dime for every time I heard, I was invested in 2008. And I got scared, I got out and I never got back in if I had a dime for every time I heard that I would be rich, much wealthier person than I am right now. And I think there's a lot of people that, you know, they watch their money goes down 3040 50% in 2008. And they pulled the plug in early 2009, really right at the bottom. And because they were not invested, they missed a 660% rally on the other side. And even if you captured a quarter of that most people would be in much better shape, then they would be leaving it outside. And I think that's where having an advisor having somebody to lean on having somebody to ask questions to in those more trying times and say, Hey, are we doing the right thing? You know, what happens if I pull my money out here? What if I can't stand anymore, that's also where good risk tolerance evaluation comes in understanding how much risk you're comfortable with and setting up the investments on the front end, so that you can withstand just about any financial weather by simply taking some of the risk off the table. So if the market goes down, 50% Are you comfortable being down 20%. And we can engineer a plan to where we can take some of the downside out of the equation that will help you stay invested. So again, money is very emotional, especially when it's your money, and not avoiding those fear driven decisions is very important in retirement. Well, two of the most powerful emotions, of course, fear number one and greed number two, so it is not surprising that money is very, very emotional. Next one is make sure your portfolio is sufficiently diversified. Yeah, so this is a big one, we have people sometimes that come in, and they have all their money in one stock, or they have you know, all their money in one or two stocks, three stocks, maybe five stocks, it's important to be diversified. You know, we want to have enough different names out there, where if one of them has a big problem that's unforeseen, that doesn't sink your whole boat. However, we don't want to be so diversified that we can't make any money either, you know, and so having, again, a plan, understanding how your investments work, having potentially a financial professional to lean on for expertise can really help make sure you're diversified enough. But we don't necessarily just want to own the entirety of the stock market, because then we're owning bad as well as the good. And so we want to be a specific diversified, but also specific. And Jake, one of our mantras on his show has been healthcare, one of the biggest expenses that you'll face in retirement, but other than that, certainly it is taxes. So the next one is aimed for tax efficiency in your portfolio. Yeah, so tax efficiency is important. I would say for the vast majority of people around here, most of their money is what's called qualified money meanings coming out of a 401 K 403 B 457 Plan where it's pre tax money, you know, I'd say probably 80% of the people I see most or all of their money is set up that way. And so because of that you don't have as much to worry about from a tax efficiency standpoint, because what we're referring to in Portfolio tax efficiency is when I buy and sell money, that's after taxes that creates taxation. And so we obviously have an eye toward that, I would say the vast majority of people that's less of a relevant thing, but for the people that it is relevant, and we're definitely paying attention to taxes and making sure we do things as efficiently as possible there. And I think most people say, Well, I've got a CPA and my CPA takes care of that. But in reality a CPA you know who just filed tax returns is looking at last year, really their whole job is to just to be
be compliant with filing your tax return. But how do you look ahead financial planners really look ahead when it comes to tax planning? Yeah, so to use an analogy, you know, it's a doctor's job to put somebody back together after they have a record a motorcycle with no helmet, the helmet is tax planning, right? So if you had planned ahead, the damage would be much less in the beginning. And so the tax professionals job is to in a lot of cases, like an h&r block person or whatever. It's their job to tell you how much you owe and see whether you held enough out, right? You're doing tax planning, we can use strategies to make how much you owe later, less than so we're kind of beginning with the end in mind is the idea behind tax planning. So Jake, how do you work with taxes? They're employed Financial Group? I mean, do you have a CPA that you can run things by when you're making these financial plans and worrying about taxes? Absolutely. As we talked about on the show before, we have rod link, he owns professional tax and accounting out of Nixa down there. And he is a great resource, very knowledgeable guy. And so we can lean on him for some of the more complex tax questions. And you know, he's, he's a very good resource for us. So if we need that kind of advanced, more extreme stuff, he's got to go to for sure. We're talking about 10 strategies for investing after retirement with Jake Floyd and flight Financial Group. Next one is consider annuities for income protection. Yeah. So annuities can be a good source of income protection. So when we think about, you know, what's the most stable income out there, if you were going to ask 100 People that a lot of them would say so security, and then others would say your pension. And so both of those are kind of like an annuity. In fact, the pensions are funded out of an annuity. But basically, you can take a sum of money and turn it into an income stream. There are other types of annuities, you can put income riders on and say, hey, no matter how long you live, we're going to pay X amount of income to you every single month, even if you run out of money, we're going to continue to pay that. And so it's a way to insure against longevity. And if you live to be 115 years old, they'll just keep paying that money out. So that can be a good thing, depending on what your goals are. But a lot of times what we'd rather do is just earn enough money to offset the income that we're getting so that you can still have your cake and eat it too. Meaning you can still have your money and continue to take your income. And, Jake, we touched on this a little while ago here in the program. But another strategy for investing after retirement would be to mitigate sequence of return risk. How can we do that? Yeah, so sequence of return risk just means that if we have the same return average, if the market goes down first, and then comes back up, versus if it goes up first, and then comes back down, when you're in accumulation mode, meaning you're still working and you're accumulating money, that doesn't really matter so much, because a 6% return is still a 6% return. However, once you retire and you start taking money out, if you have a series of bad years, right at the beginning, it can really be devastating to your portfolio. And so to mitigate that sequence of return risk, what we want to do is take some of that risk off the table, we can use bonds, we can use CDs, we can use money markets, we can use annuities, we can use a lot of different things for some of the money in your retirement portfolio to help mitigate some of that. And so if we have some negative years up front, as long as they don't hurt too bad, we can recover. We just want to make sure we don't have a really bad year like a 2008 year and our first couple of years so that we're not devastated and can't get back to even Jake, I don't know if this is investing after retirement. But another thing we want to do in retirement is hold cash reserves for emergencies and short term goals. Would you say that investing that money in things like CDs is the way to go. So I think it's important to consider what your surrender penalties would be on a CD. It used to be back in the day that you'd give up three months worth of interest if you cashed out a one year CD early. But they're getting to the point now where you give up all your interest and a portion of your principal. So make sure that you understand what the charges will be if you get out early. And a lot of cases in cash reserves and emergencies. Using a money market or a savings account may still be the best way to go. If we're pretty sure we're not going to need it, but it's just really big emergencies it might be okay to do a CD but if we're if we're going to be using that money in the foreseeable future, probably just want to leave it liquid and make sure that you can get to it easily again, this is for that emergency fund. We need to make sure that that's liquid so you can get to it. So again, liquidity is key here is your SAT and CDs not that liquid but things like savings accounts and money markets a little more liquid next one is consider hiring a financial planner. Now I think that's a pretty big one here. You know, I may have a biased opinion. But I think having a financial planner or financial advisor is a very good thing and yes, I'm biased but at the same time, if you don't know how to do plumbing, you're probably not just gonna go under the sink and start tearing apart your plumbing. Sure, you know, if you don't understand how an engine works in your car, you're not just gonna go in there with a wrench and start taking
and things apart and hoping for the best. And so I think it's similar. If you if you have a lot of knowledge about finance and a lot of knowledge about investments, you might be able to do it yourself. But for the vast majority of people, most financial decisions is the first and only time they will make a lot of those decisions. And so having a guide, having somebody that has done it literally 1000s of times before, depending on what it is hundreds of times, for sure, just having that experience can really save you a lot of heartache in a lot of scenarios. And not to mention the experience, as you said, there, Jake. But also, I understand that there are a lot of services, a lot of things that you cannot avail yourself of, if you are not a financial planner. Yeah, that's true. There's certain types of investments you would have a hard time accessing. But again, I really think the value of a financial planner lies in their experience, but also just being there to answer questions. One good question would be like, okay, so you have an account, you know, how do you start your income? How often can you take your income? How much should you hold up for taxes? If I take out 50,000? Off of 500,000? Is that too much money? You know, all those types of questions have answers. And a lot of it depends on your situation. So you need somebody who can really take a good snapshot of you and say, hey, now that you know who I am and what I want to accomplish, here's my list of questions, you can get those questions answered. And it really can, you know, help you sleep at night knowing that that you've asked the questions, you have somebody who's who's watching out for you, and just really trying to help you live your retirement the way you want to live it. So I think a good strategy would be to have a financial planner on board when you're in retirement. Next one is to hold enough equities in your portfolio. Yeah. And so we talked about this earlier, how much is enough really depends on the person, it depends on what your needs are for income and things like that what you want to pass to your beneficiaries, is that a really important thing for you or is safety, a more important thing for you. And so how much is enough equity is really varies a lot person to person enough might be zero, but there are people that need to make more money than others, maybe they didn't save quite as much as they maybe should have. And we got to maybe try to make up for some last time again, that's a little bit of a dangerous game to play, but certainly having enough to make sure we're offsetting inflation and maintaining at least some of our buying power. So as time goes forward, we're not just you know, broker each year than we were the previous year. So those are all factors to consider as far as how much equity you should hold in your portfolio. And the last strategy to consider when investing in retirement is to manage your estate. In other words, who's going to get your stuff? Yeah, and so again, this is another one that can vary widely between people, I actually sat with a lady last week, and she said, I want to die broke, you know, she wants to spend it all. And I've heard people say that a little bit differently, say, I want my last check to bounce. But for every one of those people, I have probably 20 people that say, Hey, you know, I want to live my life the way I want to live it but I would like there to be something leftover for my kids, you know, want them to get it when I'm done. And it's not that they want to spend it all they want to make sure they have enough. But they really do want to make sure that their kids get something. And so managing your estate is the process of determining what you want to have happen. And then also putting everything in place to make sure that that does happen when you're gone. And so there's a lot of people that put that stuff off, you never know what a day will bring. And you know, I'll do it tomorrow, I'll do it tomorrow. And then maybe there's not a tomorrow, you know, and so it is important to get those things handled sooner rather than later. But just understanding beneficiary designations, powers of attorney, things like that, you know, we have attorney in the building that can help you with that if you need any any of that type of service. But I think just understanding what's going to happen to your money when you're not here and making sure that that's the way you want it to go. And if it's not making changes to make sure it goes exactly the way you want it to. And the strategies that we've discussed here are not necessarily exhaustive, but they are intended to establish a framework for a deeper level of customization and confidence in a retirement plan. We've been talking with Jake Floyd here a flight Financial Group on our program, show me the money once again, if you have questions about anything that we have spoken about, we invite you to get in and sit down with Jake and get your comprehensive retirement roadmap or a financial review to get you on the road to retirement or retirement which you not only survive, but you thrive, no cost, no obligation, no judgement for that plan, call 417-889-7233 to get yours 417-889-7233 or online at Floyd financial group.com. And before we go today, Jake, I want to remind folks that we are a podcast if you've missed any part of the program today, if you'd like to hear it all over again, simply go to wherever you get your podcast and search Show Me the Money Jake Floyd, Randy Floyd, you'll find a number of shows right there. Also on YouTube with that podcast, Jay gratitude for this week. I want to thank you for your time but most of all, thanks to find people here of the last bastion of Saturday in Springfield, Missouri for joining us for Jake Floyd. I'm Jeff shade. Have a great weekend. We'll talk to you again next week with another edition of Show Me the Money right here on one Oh 4.1 FM ks GF. Where's spring?
Field comes to talk financial planning offered through Boyd Financial Group LLC and investment advisory registered in the state of Missouri. All investments carry risk and no investment strategy can guarantee your profit with the decay and loss of capital past performance is not indicative of future results.